Govt is looking to create fund of funds to fix creaky infrastructure

The Indian government wants to fix its infrastructure and needs over $1 trillion over the next five years for the same.

However, putting aside a large sum in the budget is not feasible for the Indian government, which is why it is planning to kick-start National Infrastructure Investment Fund (NIIF).

The NIIF, which was announced by Finance Minister Arun Jaitley in the budget last year, is considered as a fund of funds. It maximizes the equity that the government is able to provide from its budgetary resources.

Under NIIF, the government can contribute Rs 20,000 crore and then the investors can pool in a little more than that.

So, if the NIIF become a Rs 40,000-crore fund, it can be used for infra projects and the funds get multiplied over the years.

Minister of State for Finance, Jayant Sinha, said the government has been working on NIIF since a year and global experts of all the major consulting companies, all the major investment banks have been contacted for the same.

"It's an extremely well-meaning initiative. It could catalyze resolution of stressed assets in the country... by providing last-mile capex and working capital to projects which have the potential and are stuck. This will bring in much relief to the banks who are otherwise the only source of such capital,” Sanjay Nayar, CEO of KKR India, told ET.

Vinayak Chatterjee, chairman, Feedback Infra. Told ET, “You take Rs 20,000 crore from the budget in a year and you can raise Rs 4 lakh crore. Next year, by putting in another Rs 10,000 crore, you can add to this. This is happening only at the NIIF level, and by going a step below you can enhance the leverage 15-20 times."

Meanwhile, the NIIF, which will be 49% government owned, will ensure there is no red-tapism.

"We are firewalling the NIIF from the government, not just in this government but all other subsequent governments as well," said Jayant Sinha.

(Image: Indiatimes)